CHAPTER6 Design Thinking and Innovation W hat is design thinking? How can it be used to create significant innovation? Are there steps that can be followed to implement design thinking on an individual or company basis? Are there good examples of the successful use of design thinking in an organization? Scenario: IKEA Ingvar Kamprad was born in southern Sweden on March 30, 1926, and was raised on a farm called Elmtaryd near the small village of Agunnaryd. Even as a young boy, Kamprad had an entrepreneurial spirit. At the age of 5, he discovered a good profit could be made by buying matches cheaply in bulk in Stockholm and then individually reselling the matches to his neighbors in the country. He started by selling matches to his closest neighbors, but by the time he was 7, Kamprad put his growing match business on wheels, using his bicycle to sell matches to customers farther and farther from Elmtaryd. Gradually, Kamprad expanded his business offerings from selling only matches to also selling flower seeds, greeting cards, holiday decorations, pencils, and ballpoint pens. In 1943, when Ingvar Kamprad completed school at the age of 17, his father gave him some money as a reward for doing well. Kamprad, the eternal entrepreneur, used this money to establish IKEA. The name IKEA was formed from his initials (I and K) and the first letters of Elmtaryd and Agunnaryd, the farm and village where he grew up. Initially, IKEA focused on the products Kamprad was already selling, but gradually the company expanded the product offerings to include wallets, watches, and jewelry. Within 2 short years, IKEA grew to such an extent that Kamprad could no longer make individual sales calls, and he launched a mail order service to continue meeting the growing customer demands for his products. In 1948—just 5 years after starting IKEA—Kamprad introduced his first line of furniture using local manufacturers in the forests close to his home to supply the finished goods. The furniture line was a huge success, and Kamprad believed IKEA could become a large-scale furniture provider. In 1951, Kamprad decided to discontinue all other product lines in order to focus the company’s attention solely on producing furniture. He launched the IKEA catalog strategy, which today remains one of IKEA’s major advertising strategies. However, around this same time, IKEA became embroiled in a pricing war with its main competitor. As the two companies continued lowering prices, Kamprad became concerned about the quality of the furniture and the image customers would have of their quality. To address these concerns, in 1953 IKEA opened its initial furniture showroom to demonstrate the function and quality of IKEA’s low-priced products. Located in Älmhult, Sweden, this first showroom was well received by customers because, for the first time, they could see the products in real life before purchasing them. The showroom concept worked, and it became a competitive differentiator with custom ...

1. CHAPTER6
Design Thinking and Innovation
W
hat is design thinking? How can it be used to create significant
innovation? Are there steps that can be followed to implement
design thinking on an individual or company basis? Are there
good examples of the successful use of design thinking in an
organization?
Scenario: IKEA
Ingvar Kamprad was born in southern Sweden on March 30,
1926, and was raised on a farm called Elmtaryd near the small
village of Agunnaryd. Even as a young boy, Kamprad had an
entrepreneurial spirit. At the age of 5, he discovered a good
profit could be made by buying matches cheaply in bulk in
Stockholm and then individually reselling the matches to his
neighbors in the country. He started by selling matches to his
closest neighbors, but by the time he was 7, Kamprad put his
growing match business on wheels, using his bicycle to sell
matches to customers farther and farther from Elmtaryd.
Gradually, Kamprad expanded his business offerings from
selling only matches to also selling flower seeds, greeting
cards, holiday decorations, pencils, and ballpoint pens.
In 1943, when Ingvar Kamprad completed school at the age of
17, his father gave him some money as a reward for doing well.
Kamprad, the eternal entrepreneur, used this money to establish
IKEA. The name IKEA was formed from his initials (I and K)
and the first letters of Elmtaryd and Agunnaryd, the farm and
village where he grew up. Initially, IKEA focused on the
products Kamprad was already selling, but gradually the
company expanded the product offerings to include wallets,
watches, and jewelry. Within 2 short years, IKEA grew to such
an extent that Kamprad could no longer make individual sales
calls, and he launched a mail order service to continue meeting
the growing customer demands for his products.

2. In 1948—just 5 years after starting IKEA—Kamprad introduced
his first line of furniture using local manufacturers in the
forests close to his home to supply the finished goods. The
furniture line was a huge success, and Kamprad believed IKEA
could become a large-scale furniture provider. In 1951,
Kamprad decided to discontinue all other product lines in order
to focus the company’s attention solely on producing furniture.
He launched the IKEA catalog strategy, which today remains
one of IKEA’s major advertising strategies. However, around
this same time, IKEA became embroiled in a pricing war with
its main competitor. As the two companies continued lowering
prices, Kamprad became concerned about the quality of the
furniture and the image customers would have of their quality.
To address these concerns, in 1953 IKEA opened its initial
furniture showroom to demonstrate the function and quality of
IKEA’s low-priced products. Located in Älmhult, Sweden, this
first showroom was well received by customers because, for the
first time, they could see the products in real life before
purchasing them. The showroom concept worked, and it became
a competitive differentiator with customers choosing IKEA over
its competitors, leading to greater sales volumes.
In 1956, IKEA embarked on another mission that would change
the company forever. In response to a supplier boycott
organized by their competitors, IKEA began the process of
vertically integrating their company by designing their own
furniture. Coincidentally, around this same time, a local
draughtsman realized that if he took the legs off an IKEA table,
he could fit the table into the trunk of his car. Kamprad
recognized the advantages of shipping furniture in such a way,
and almost overnight, IKEA launched the flat pack model and
revolutionized the company and the furniture industry. Going
forward, IKEA designed furniture that could be shipped in flat
packaging and assembled by customers after purchase, leading
to easier transportation of furniture to customer homes as well
as lower prices.
Throughout the next decade, IKEA expanded its stores from

3. Sweden to neighboring countries including Denmark, Germany,
and Switzerland. As increasing numbers of people showed up at
IKEA showrooms, Kamprad decided to change the layout of the
stores from that of a showroom to a self-service warehouse
model that allowed customers to select and load their own
furniture. This helped IKEA to further improve the customer
experience and drive costs down even further. Wherever IKEA
expanded to, it was successful in creating a cult-like following
from its customers. IKEA opened its first store in the United
States in 1985 and has grown today to be a global retail brand
with over 131,000 employees. As of August 2011, the IKEA
group operated 287 stores in 26 countries.
Kamprad’s vision has been the driving force behind IKEA’s
continued success. In 1976, Kamprad wrote and published The
Testament of a FurnitureDealer, documenting IKEA’s vision
and business idea, which had a strong influence on the
development and vitality of IKEA’s corporate culture. From
inception, IKEA has been dedicated to meeting customer
demands and providing them with high quality, well-functioning
products at low prices. IKEA in its design thinking has
intentionally kept product lines simple to minimize the potential
for damage during transport and make it easier for customers to
take their furniture home themselves. Kamprad believes his
company exists not just to improve people’s lives but to
improve the people themselves (“Famous Entrepreneur Advice,”
n.d.). By allowing customers to select their furniture from the
self-service warehouse store and to easily assemble their
furniture at home, Kamprad believes he is improving customers’
self-sufficiency and self-confidence. The vision of IKEA
helping people to improve themselves is reinforced in IKEA’s
advertising and catalog.
Despite being one of the richest people in the world, Ingvar
Kamprad also has a legendary reputation for thriftiness. He has
always tried to set a good example for his employees by
working hard and cutting costs wherever he can. He is the
personification of the company he created and inherently

4. understands that his workers look to him for direction.
Kamprad’s level of frugality is matched only by his desire to
make the most of his time. One of his most important maxims
that he outlines in his The Testament of a FurnitureDealer is
that “most things still remain to be done.” It is with the goals of
efficiency and persistent work that the corporate philosophy of
IKEA is built upon. An example of this is IKEA’s focus on
strictly maintaining a flat management structure within the
organization.
Kamprad has repeatedly refused to take IKEA public, stating
that it would slow the quick decision-making processes that
allowed for IKEA’s phenomenal growth. In 1982, Kamprad
established IKEA Group and gave his shares to Stitching
INGKA Foundation, a charity supporting “innovation in the
field of architecture and interior” (“IKEA: Flat-Pack
Accounting,” 2006). Kamprad made this move for the express
objective of avoiding high taxes in Sweden and to ensure the
company he worked so hard to build could not be ruined or sold
by future members of the Kamprad family. In 1986, Kamprad
retired from the CEO position and has since taken up an
advisory role to the holding company.
Through working hard, having a keen ability to turn obstacles
into competitive advantages, and encouraging what is now
labeled as Design Thinking, Kamprad successfully built one of
the largest and most profitable companies in history and
distinguished himself as one of the most savvy and successful
entrepreneurs of our time. Although his career has not been
without its share of controversy, Kamprad has always owned up
to his mistakes and is famous for saying, “Only those who are
asleep make no mistakes” (“SUCCESS Quotes by Legendary
Billionaires,” n.d.).
Definition of Design Thinking
Design thinking is a new approach to create breakthrough
innovation and promote high-performance collaboration. It is
quite different from analytical thinking and is a process for
action. It is a method for discovering new opportunities and

5. solving problems. While there are a variety of techniques and
tools that can be used, the core process is somewhat universal.
Aspects of Design Thinking
It is generally understood that there are five key elements in
design thinking: (1) defining the problem, (2) developing the
options, (3) determining the direction, (4) selecting the best
solution, and (5) executing. The steps have some degree of
similarity to those in the scientific process. Each of these will
be discussed in turn.
Defining the Problem
This first step, correctly defining the problem, while sounding
simple is often the most difficult of design thinking. If the right
problem is not defined, then of course the solution, if obtained,
is for something else. Defining the problem is usually a team
effort with a significant amount of participation by each team
member.
Defining the problem usually involves observation—discerning
what individuals actually do versus what they may say they do.
It also involves cross-functional thinking trying to find the real
issues involved. Any preconceived notions or judgments need to
be abandoned so that the right problem can be defined in such a
way that creative solutions can occur. If the problem is a sitting
apparatus, the problem is not to design a chair but to design
something to suspend a person from the floor.
Developing the Options
Once the problem is defined, the second element—developing
the options—takes place. Care should be taken not to take the
same approach as has been used in the past. Design thinking
requires the creation of several solutions to the problem for
consideration even when one solution seems obvious. For this to
occur, multiple perspectives and team involvement are
important. Multiple people involved develop a far richer range
of solutions.
Determining the Direction
This third stage—determining the direction—requires that the
most promising solutions are carefully nurtured. An

6. environment in the organization needs to be created so that each
solution can be allowed to develop and grow. This environment
of experimentation and testing allows the best solution to
emerge. Often during this stage, ideas are combined to form an
even better solution.
Selecting the Best
Solution
From the many solutions maturing from the previous stage, the
best solution can be selected. Prototypes of this solution are
created and tested. This vigorous testing helps to ensure that the
final solution is the best possible one.
Executing
Once the optimal form of the solution to the problem is found,
the solution needs to be implemented. This execution element
may prove difficult particularly when significant change is
involved. Design thinking involves the acceptance of change
and risk, which is often not easily embraced both by individuals
and organizations. Execution also involves implementing design
thinking on a continual basis as it is a repeatable process that
will result in creative solutions to problems defined.
Organizational Barriers
Even when the best methodology and techniques are employed,
for design thinking to succeed, there is a need for organizational

7. commitment. When first understanding design thinking, an
organization should be prepared to fail at the beginning. Most
people find it difficult to use their imaginations and react to
distractions. In design thinking, failure is not necessarily bad as
it can often lead to success. Design thinking focuses on and
nurtures a number of alternatives until the best solution
emerges. Some common organization issues develop the
following barriers to the successful implementation of design
thinking.
Lack of Management Commitment
This barrier is a significant one that occurs in organizations.
Top-level management must openly endorse and practice design
thinking. Without this, employees at lower levels of the
organization will not embrace and practice it themselves. In
many cases, there is resistance at some level in the
organization. This permafrost or resistance to using design
thinking needs to be unfrozen through training and education. In
some cases, the only method of removal is eliminating or
reassigning the source of the permafrost.
Lack of Performance Indicators
Another barrier to the successful use of design thinking is due
to the lack of measureable indicators of success. The lack of a
quantifiable framework to measure the output of design thinking
makes it difficult for some organizations to accept and
implement it as a problem solving methodology. In some

8. organizations, it is important to begin design thinking by
focusing on a small problem with a significant upside potential.
Resistance to Change
As with anything new, people and organizations are resistant to
change even when they think it is a good thing. This is
particularly the case when it causes discomfort and a change in
behavior. The more radical the change in behavior that is
required in an organization to adopt design thinking, the more
the resistance to this change will occur. When this is the case, it
is often easier to start the first design thinking process on a
problem that is totally outside the usual domain. Once
individuals become familiar with the technique, it can then be
used to focus on solutions to problems in their usual domain.
Three companies will be discussed that have overcome these
and other organizational barriers and successfully implemented
design thinking: (1) IDEO, (2) Redbox Automated Retail LLC,
and (3) IKEA.
Table 6.1 Characteristics of a Design-Thinking Organization
• Supports people
• Protects people
• Tolerates mistakes
• Advises people
• Takes risks
• Shares a vision
• Delegates to those closest to the problem

9. • Tolerates internal competition
• Stimulates creativity
• Actively searches for ideas
• Tolerates disorder
• Encourages experimentation and tests
• Trusts people
• Tolerates ambiguity
• Does not interfere
Overall Culture
The overall culture of the organization can either support or
inhibit design thinking. An organizational culture that is guided
by a vision, encourages freedom, and has such characteristics as
trust, belief in people, expandability, people growth, and job
ownership allows more creativity to occur and increases the
quality and output of design thinking versus a more traditional
organizational culture. This type of organization provides an
environment for employees to want to own their jobs and do
everything possible to make the organization and the results of
their position world class. A list of the characteristics of this
type of organization is found in Table 6.1. The overall cultural
climate is one of sharing, trying something new, suggesting and
experimenting, and feeling responsible.
IDEO
The company that is probably most well known for successfully
implementing design thinking to solve problems in a variety of

10. company situations is IDEO. These applications include
designing the Pilates Allegro 2 Reformer, building the ultimate
utility bicycle, designing Walgreens’ community pharmacy,
designing the Steelcase node chair, developing Gannett
Company’s bold italic, designing Changi General Hospital’s
orthopedic clinic patient experience, and designing the ideal
home for the Wounded Warriors.
In one project for Bank of America, IDEO worked with a team
from the bank focused on the consumer behavior of putting their
change received in a jar at home. Once the jar is full, it is either
spent on something special or else deposited in a bank account.
To mirror this behavior, in 2005, Bank of America launched a
new savings account service called “Keep the Change.”
Customers who apply for and use their new debit card to make
purchases can round up the purchase to the nearest dollar and
have the difference deposited directly in their savings account.
While this design thinking output encourages people to save,
appealing to each individual’s instinctive desire to put money
aside in a painless way, the real payoff is an emotional one—
seeing an increase in the monthly savings account statement
without much effort.
IDEO also used design thinking with a team from Kaiser
Permanente, a large health care provider. Kaiser wanted all of
its administrators, doctors, and nurses to use design thinking in
providing solutions to problems encountered and inspire new

11. ideas. One project was to reengineer nursing shift changes at
several Kaiser hospitals. The team from IDEO and the hospital
working with frontline practitioners from each hospital first
identified the problems occurring during shift changes.
Potential solutions were explored through brainstorming and
service prototyping. The options were evaluated to determine
the best solution to shift changing, which was then
implemented.
Besides services, IDEO has worked on a variety of products in
the health care area. When a group of surgeons were describing
the ideal product for sinus surgery and all its characteristics and
features, the team from IDEO created some initial designs and
prototypes. These were then tested and evaluated and a final
prototype was developed, which was followed by the final
product for sinus surgery. These examples of IDEO using design
thinking show the one basic rule for success: Keep as many
options in play as long as possible so that the best possible
solution can emerge.
Redbox Automated Retail, LLC
Redbox Automated Retail, LLC, a wholly owned subsidiary of
Coinstar, Inc., provides Blu-ray discs, newly released DVDs,
and/or video games for rent through conveniently located
kiosks. The over 35,400 kiosks, designed with the assistance of
IDEO, are located in places where individuals shop, making
renting and returning a convenient, simple, timely process. The

12. new self-service kiosk, developed through the design thinking
process, enhances the consumer experience in making an
average $2 rental by moving them through stages in the decision
process: attract, educate, and engage. The layered signage
attracts the consumers to the red box where they can browse
(educate) through the changing titles and easily make the
purchase decision (engage).
The new kiosks are in locations throughout the United States
inside and outside of leading grocery, drug, and convenience
stores such as Walgreens and Walmart as well as fast-food
franchises such as McDonald’s. Redbox contributed to the
increased market share in this rental market from kiosks and
achieved its 2 billionth rental at a McDonald’s restaurant in
Philomath, Oregon. The company feels the new kiosk created
through the design thinking process contributed significantly to
its success and growth.
IKEA
The company appropriately featured as the scenario to this
chapter, IKEA, is a great example of the design thinking
process. As stated earlier, IKEA was founded in 1943 in a small
village (Agunnaryd) in Sweden; their vision is to create a better
everyday life through modern yet not trendy home furnishings.
The vision transferred into a wide range of uniquely designed
home furnishing products that are very functional in nature.
Each product reflects the Swedish approach to design thinking.

13. Each is attractive yet functional, human-oriented, and
environmentally friendly. The unique design thinking apparent
in each home furnishing product represents the healthy, fresh
Swedish lifestyle. The carefully chosen colors and materials are
part of this design thinking allowing IKEA to be a major retail
player in over 45 countries. By maximizing the functionality,
use of raw materials, and efficient production, IKEA can meet
the needs and desires of the market at a low cost. This low cost
and resulting lower retail price allows the home furnishings to
appeal to a broad market.
IKEA’s vision is evident in its outreach and promotional
efforts. In 2011, the company launched Share Space—a
community photo-sharing website where individuals can share
photos using IKEA products in their own living spaces.
Customers are encouraged to share their own design thinking by
sharing their personal solutions to design challenges in their
living rooms, kitchens, or other areas in the home. One room
will be selected by IKEA design experts as the “Pick of the
Week” and is then featured on the Share Space homepage and in
the company’s blog.
Another unique project is the Life Improvement Project (LIP) to
inspire consumers to create a better life for themselves. This
program communicates the brand and the vision of the company.
One feature of the LIP is the Life Improvement Sabbatical
contest. The winner receives one year off from work and

14. $100,000 to advance any project that improves the lives of
others.
Future
As is evident in each of these examples as well as in many
organizations around the world, design thinking has provided
many benefits and interesting results. Through this new process
format, design thinking allowed organizations to expand their
ideas and offerings resulting in many successes but also many
failures. Some organizations turned the process into a linear
step-by-step methodology that often delivered nothing creative
and at best incremental change and innovation. While design
thinking will of course continue to be used with mixed results in
the future, two other approaches also offer a way to switch
between multiple perspectives and institute creativity—(1)
futures thinking and creative intelligence (CQ).
Futures Thinking
Futures thinking combines data, trend analysis, intuition, and
imagination to develop sustainable paths of action. It is a set of
practices and principles for solving problems regardless of their
degree of complexity. It consists basically of four aspects: (1)
asking the question, (2) scanning the world, (3) mapping the
possibilities, and (4) asking the next question. Like design
thinking, futures thinking is an iterative process to consider a
range of possibilities and outcomes. This new way of thinking is
based on practical research and analysis in challenging

15. assumptions about the problem and its most favorable solution.
Creative Intelligence
Since one of the major objectives of design thinking was to
stimulate creativity, this is the prime focus of CQ, framing
problems in new ways in order to develop original solutions. It
is more of a sociological approach with creativity emerging
from group activity. CQ is a hybrid of design thinking, scenario
planning, systems thinking, and gaming.
References
Famous entrepreneur advice. (n.d.). Retrieved March 17, 2013,
from www.evancarmichael.com/Famous-
Entrepreneurs/825/summary.php
IKEA: Flat-pack accounting. (2006, May 11). The
Economist,379(8477), 76.
Kamprad, I. (1976). The testament of a furniture dealer: A little
IKEA dictionary. Netherlands: Inter IKEA Systems B.V.
SUCCESS quotes by legendary billionaires. (n.d.). Retrieved
March 17, 2013, from www.mycomeup.com/Success-
Quotes/SUCCESS-Quotes-By-Legendary-Billionaires-Updated-
Version.html
Suggested Readings
Fraser, H. (2006, Spring/Summer). Turning design thinking into
design doing. RotmanMagazine, 24–28.
In this article, Heather Fraser, director of Business Design
Initiatives in the Desautels Centre for Integrative Thinking at

16. the Rotman School, exposes the different lessons on how best to
transform “inspiration into implementation.” If design is now
considered a business necessity for competitive edge, it is
crucial for business leaders to understand how to truly convert
design into “an accessible, doable program.” The author argues
that design thinking is far from being “an attribute”; it is
fundamentally about action.
Mootee, I. (2011, March). Strategic innovation and the fuzzy
front end. Ivey Business Journal, 21, 38–42.
The author presents the design thinking process under a new
light that he refers to as “the fuzzy front end.” Idris Mootee
advocates this new approach as a critical and systematic process
that companies should incorporate to their management mind-
set for getting a better picture of the future and identifying
opportunities that otherwise would be missed. Throughout the
article, the author presents the fuzzy front-end approach as an
“insight-driven, prototype-powered and foresight-inspired
search for new ideas that can be applied to products, services,
experiences, business strategies, and business models” (p. 38).
Tischler, L. (2011, October). The United States of design. Fast
Company, 159, 77–88.
Linda Tischler presents a series of new and existing U.S.
businesses that successfully combine innovation, design, and
technology in their management and product offerings. The
article posits that now that American firms have made

17. customers their pivotal point of focus, American design is
having a global impact in everything from fashion to
human/machine interface, system design, and health care
devices. Design worldwide is also discussed as more and more
countries are also investing in design and integrating it into
their business models.